64 comments:

This is fascinating to watch. The attraction of Cain is quite simple. We often elect the opposite of the current President. Our current President is an elite academic who has never even worked in the private sector, let alone run a biz and make a payroll. Cain is the opposite. Is he the answer..maybe not. But the visceral dislike our academia blogger has for Cain is more than a little interesting.

Yeah, well there have been many variants of the same notion around for a long, long time. Here's another Herman, Herman Kahn, remember him, the guy Dr. Strangelove was modeled on? He was also one of the great strategic thinks of MAD and worked for the RAND Corp. for years.

Someone from the left mentioned this yesterday (I forget which). To which I responded that the default tax rates in Simcity work very well and growth is exponential...until your whiny, bitchy, spoiled little Sims start whining and bitching about everything.

As far as Cain getting it from Maxis, I have serious doubts about it. Games like Simcity usually involve quite a lot of time. Gaming does not equate in almost all cases with achievers like Cain. They simply don't have the time nor the inclination.

Now...if you can show me that he was a SimCity4 wiz and still managed to accomplished everything on his very deep resume, I'd say that's worth my gamer's vote.

"The big tax avoidance under his scheme is not buying stuff, which of course has the added advantage of perpetuating the economic slump."

Since the current powers that be think that NOT spending money on health insurance is commerce, would the same powers then find a way to tax NON-spending if they thought people were "avoiding" taxes by not buying stuff.

The big tax avoidance under his scheme is not buying stuff, which of course has the added advantage of perpetuating the economic slump.

Americans will simply not stop buying "stuff". I dropped my daughter off for piano Wednesday night and sauntered next door to a packed Applebees for a quick beer. Packed. On an average Wednesday night full of people buying completely unnecessarily expensive food.

Smokers in NY pay something like $12 for a pack of smokes now, don't they?

"House Budget Committee chairman Paul Ryan said in an interview with The Daily Caller that he “loves” the idea of having “specific and credible” plans, like presidential candidate Herman Cain’s signature “9-9-9″ proposal, in the national debate about tax policy.

Ryan told The Daily Caller in an exclusive interview that Cain’s plan is a good starting point for debate, and shows the GOP presidential campaign season has entered into a more advanced stage where ideas — not just personalities — have come to the forefront.

“We need more bold ideas like this because it is specific and credible,” Ryan said. “I’m more of a flat-tax kind of a guy.”

The budget chairman went on to say that ideas like Cain’s plan could help shape the debate over tax reform moving into 2013.

Althouse: "The big tax avoidance under his scheme is not buying stuff..."

...because those fat-cats and New York moneymen will horde the cash under their mattresses. Because it does them so much good there. They can take it out from time to time and roll in it.

Althouse, if you don't see how much more efficient a consumption tax would be, in terms of revenue actually collected as a percentage of marginal rate, and in terms of returning a huge number of people currently involved in tax-minimization strategies to a more economically productive activity, then I really have to re-assess my opinion of your intellect.

"The big tax avoidance under his scheme is not buying stuff, which of course has the added advantage of perpetuating the economic slump."

There's likely some effect from reduced consumption, but it'll encourage savings and discourage debt which is our main problem. In the long term I think 9-9-9 is more economically sustainable. However I expect this plan is not politically viable because it reduces the power of Congress. It would be great but I can't see it passing.

There's another real world objection to 9-9-9. If a new 9% consumption tax is added to the mix, who's to say it can't be upped to 10% or 15% or whatever once the Democrats return to power, and they will eventually.

Better to simplify the existing code without adding a new revenue stream.

No, he doesn't endorse it. He's for a flat (income) tax and Cain is ultimately for the so-called fair (consumption) tax. But Ryan does call it credible and specific, and he doesn't accuse Cain of pulling numbers from the Necronomicon or Super Mario Brothers.

There's more agreement between Cain and Ryan (they both want a flat, less-progressive tax with fewer or no deductions and less complication) than there are disagreements. And Ryan, I do believe, is someone who you could support, Althouse.

I wonder what the difference is between Ryan and Cain, from your perspective.

Is it Cain's accent? Is it his tendency to be plain-spoken and folksy? The fact that he doesn't glibly produce polished, canned talking points in response to debate questions? The fact that he's not a professional career politician?

"Art Laffer, an economic adviser to President Reagan, joined Bret Baier to share his thoughts on Herman Cain’s “999″ tax plan.

“I think it’s a wonderful plan,” Laffer said. He praised the plan’s structure that he says would “lower the tax rate and broaden the tax base” while providing people with the least incentive to cheat their taxes. He also emphasized the importance of getting rid of the corporate rate."

“The current tax codes are filled with all sorts of awful ducks, chickens, pigs and turkeys,” Laffer said. “They’ve got to be cleaned out and we have to revamp the codes. I’d really like to see that done.”

I'm a fan of vat or sales tax in lieu of income tax because it caputures the underground economy and greatly reduces the wasted resources of avoidance (most businesses won't risk non-compliance, and smuggling isn't practical to avoid taxes in the range we're talking). I'm also in favor of their being one tax. We should understand how much our government costs us so we can understand what's going on.

So naturally I see the outline of this as a step in the right direction. But I don't see any real basis for Cain's conclusion that this specific plan is the best one from all the options. I can't even find a position paper outlining how much of a change in total tax this would represent. Cain's refusal to name more than 1 advisor and the catchiness of the numbers already leave the impression that this wasn't really studied. If it turns out to be inspired by a video game he's done.

Anyway, that's just the set up. What boggles my mind is how unnecessary this misstep was. I don't want candidates to show up with plans they've already decided on without public input (ObamaCare, Hillarycare, etc). He should have said "we need tax reform in this country, and here's an example of something we should investigate. I'm going to make it my priority to solicit suggestions from everyone and decide on the best plan after I've analyzed the options. But my goals are to simplify, remove favoritism, and increase transparency."

If he can't come up with evidence this plan has been thoroughly evaluated it will sink him - in the general if not in the primary and it was completely unnecessary.

Ann wrote:The big tax avoidance under his scheme is not buying stuff, which of course has the added advantage of perpetuating the economic slump.

There are a few reasons to be skeptical of 9-9-9, a chief one being can it be implemented at all, giving the political clout of attorneys and tax accountants in this country, but whether a 9% sales tax would discourage spending isn't one of them, at least to my mind. Persons with money tend to spend it, or invest it. They don't usually sleep on it, unless they buy gold, which amounts to sleeping on it. True, a sales tax of any size does not stimulate demand, and the higher the rate the more it fails to stimulate.

Unfortunately for the critics of 9-9-9 what the economy doesn't need is more artificial stimulus of the demand side, we've had quite enough of that already. All that Keynesian manipulation of aggregate demand achieves is short-term comfort which stores up trouble down the road (we're living through the downside of demand stimulus right now) and even the short-run benefits only work if there's plenty of public capital to do the stimulating. We don't have much of that today do we?

Cain's 9% sales tax would encourage savings on the part of those with an income surplus, which is good if the savings aren't sewn in the mattress or invested in non-capital markets -- precious metals, foreign currencies, etc. -- in other words somewhere that doesn't help our faltering domestic business sector, the real engine of GDP growth which needs attention. So some kind of additional incentive or disincentive might be needed.

Yes, that's right, Joanna. They just stop spending money. Sometimes if they're hungry, they'll boil the dollars into a tasty soup. And if their shoes are worn thin, they'll use the money to cover the holes in their soles. Stingy bastards.

I remember in 2008 all the swooning over Obama and how much smarter he was when it came to economics than McCain. Look how that's turned out. My 14 year old has a better grasp of economics than Obama. Herman Cain's proposals aren't as out there as the chattering classes are trying to make them seem. And he certainly can't be any worse than what we have running the country now. I'm sending him a check today.

"...because those fat-cats and New York moneymen will horde the cash under their mattresses."

I thought there weren't enough rich people to collect enough taxes from. The sales tax is a scheme to get money from everybody. Of course, money can be raked in, but it also affects choices about how much to spend. Everything would become more expensive. People respond to price. We're already buying much more than we need. Everyone could cut back. But to "get the economy moving again" -- as they say, like it's a digestive tract -- we need people to buy lots of stuff.

Think of all the things you don't need: another car, more clothes, any kind of travel, restaurant meals, movies, etc. etc.

michaele, I think you're falling into a common trap: Taxes shouldn't have, as their purpose, the herding of consumers toward behaviors preordained by the ruling class to be desirable.

They should have the goal of capturing revenue for the government in an efficient and equitable way.

This plan probably doesn't include sales tax on used goods so that the government doesn't just keep taking a bite out of that same apple, gathering revenue off of one El Camino over and over and over til they've captured $10,000 tax on a $4,000 car.

The fact that the 9% tax isn't levied on each sale will affect behavior, but an equilibrium point will be reached and people will still continue to purchase new cars.

Althouse said: "Think of all the things you don't need: another car, more clothes, any kind of travel, restaurant meals, movies, etc. etc."

Think of how much cheaper that second car will be if all of the 2nd and 3rd tier parts suppliers only have to pay 9% corporate income tax.

Think of how much more disposable income I'll have if I'm in the 9% bracket instead of the 28% bracket.

I'm pretty sure that will more than make up for the 9% sales tax; unless my math is off. Let's see, 9 + 9 = 18, and 18 < 28. Yeah, it seems to hold water.

Think of how many more people will be employed, with all corporations paying just 9%. Think of how much more money those consumers will have to spend than they would have when unemployed. That's the big factor here.

People make money and they want things. They'll continue to buy things as long as they have enough money to afford to buy them. And they'll have enough money, despite the fact that there's a point-of-sale tax, because in most cases, they'll be allowed to keep more of their own money in the first place.

As for it being non-progressive or regressive: Bullshit. I'd still pay twice as much tax as someone who makes half as much as me, despite the fact that I don't use twice the services of government that they do.

A truly flat tax would be one fixed amount, say $1,500, from every US citizen.

"Think of how much cheaper that second car will be if all of the 2nd and 3rd tier parts suppliers only have to pay 9% corporate income tax. Think of how much more disposable income I'll have if I'm in the 9% bracket instead of the 28% bracket."

Think of a future in which so many variables have changed that you can't possibly know what it will really be like. Got your picture? What is it a picture of? Your own wishes and fears 'n hopes 'n dreams. Now, you want me to jump for it all with you? I'm sorry, I am not a character in your dream.

As for it being non-progressive or regressive: Bullshit. I'd still pay twice as much tax as someone who makes half as much as me, despite the fact that I don't use twice the services of government that they do.

AMEN.

Consumption taxes are not regressive, even at the most basic level.

Rich people buy lobster. Poor people buy bologna. Last I checked, the market price per pound of each was not equal.

Actually, Althouse, you were a character in one of my dreams: A few months ago I dreamed that you were blogging with a laptop from the stands of a baseball stadium, and hundreds of us commenters were there in the stands with you.

I have no idea what most of these people look like, yet I somehow knew who was who. If I recall correctly, there was some sort of suspenseful subplot involving Palladian, Lem, and someone getting killed. It's all a little fuzzy after these months.

I agree that Cain's 9-9-9 plan is unsettling, in that it's a radical departure from the norm. But it's not anti-conservative, because the current tax system has been foisted upon us by some of the least conservative social engineers in history.

It's an attempt to decrease the burden on business, not just the tax burden, but the burden of compliance. It's an attempt to spread the tax burden to everyone, so that everyone has skin in this game -- and that's a critical point. We're at a tipping point right now, with just under 50% of our population acting as net tax-eaters, paying less than they receive. When that number reaches 54% or 55%...

That's one dream that I don't want to participate in. That's William Ayers' dream.

And I think that our current situation (the fact that the federal government is buried under an insurmountable debt, and worse still, a mountain of unfunded liabilities that dwarfs the debt) calls for bold action. Not just slightly tweaked more-of-the-same from some technocrat that helped get us into this state.

"The big tax avoidance under his scheme is not buying stuff, which of course has the added advantage of perpetuating the economic slump."

Seriously Professor? I realize Ayn Rand has said roughly the same about income tax and earnings in "Atlas Shrugged". However, as Pastafarian notes, people need to buy food, clothing, and shelter and a bundle of unspent cash doesn't satisfy the hunger, though I guess burning it might keep a person warm. Some might make it awhile with hand me downs and trade of durable goods, but entertainment isn't as exciting on the old phonograph.

Texas has both a property and sales tax, and Texans still purchase property and other things.

Cain is a Southerner. Everybody in the North knows that Southerners, black or white, are stupid, violent, dishonest, and crazy. If Cain is not on the ticket, I will vote Libertarian again. I voted for Bob Barr last time. South Carolina will most likely go Republican no matter how I vote.

This article appeared on The New York Times (Online) on October 13, 2011.

"For the same reasons, people should like Herman Cain's 9-9-9 tax plan. At least in theory.

It is based on the idea that the tax rate should not penalize people for being productive, and even an ardent supply-side sympathizer like me can't complain too much about a 9 percent rate.

Another key principle is the repeal of most forms of double taxation, which is why Cain's plan gets rid of punitive provisions like the death tax and capital gains tax. Stopping the Internal Revenue Service from getting more than one bite at the apple is good for growth since even socialists agree that capital formation is key for long-run wage growth and higher living standards.

And Cain also takes a chainsaw to the underbrush of credits, deductions, shelters, loopholes, exemptions, and other distortions in the tax code. This means people will make decisions on the basis of good economics rather than clever tax planning."

"Kevin Hassett, director of economic policy studies at the American Enterprise Institute, said the plan would simplify the tax code and not sacrifice current tax revenue. "We'd have pretty high confidence that it could increase growth a lot," he said.

"This is a far more sophisticated plan than one might have expected, given that he is not a person that has been inside politics his whole life," Hassett said. "The Cain plan is really solid. The only criticism one could make is it's too bold or something like that."

Cain's 999 Plan is appealing because the US voter is tired of politicians.

Cain is seen as an experienced businessman who is a political outsider.

His 999 Plan is easy to understand and throws out the old system... He is now either beating Romney or in a dead heat tie with Romney in the last 5 National Polls..He is ahead in SC, Nebraska...only down 3 in Iowa.

This is just not your world. This is about real productive people and activity that turns material into objects of use and value, that builds real things, investing their own money and being net tax payers and contributors. I doubt you know many people like that and probably spend most days never talking to one, other than the coffee shop owner.

That's my opinion and not a criticism. I just think it affects your view.

My daughter played Sim City in grammar school, 12 years ago. BTW, Art Laffer is about as relevant as leisure suits and about as effective as using an 8 ball to predict the future. His day has come and gone. As a proud USC graduate, where he taught for oh so many years, here is hoping he is already retired.

What will we do with the 999 when it comes time for city or county sales taxes.

Coincidentally, the way Sim city plays bears out Laffer in the sense that there is an optimum tax revenue. New players will often raise taxes to get more revenue to fund infrastructure building. However, increasing taxes creates tax avoidance behavior in the city population such as leaving in droves that drive total tax revenues down. If you make taxes too low, you get a similar issue because the population / productivity gains aren't enough to offset the low percent the government is taking.

Whether the developers intended to or not, the the game's simplistic but economically valid logic gave many players an intuitive understanding for why the Democrat instinct for ever higher taxes is ultimately misguided.

The Huffington Post piece to which Ann links was an attempt to derisively mock Cain's plan by drawing an an obviously false parallel between the game and Cain's plan. Ironic that the game inadvertenly supports the key economic theorist who advocates for Cain's plan.